Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • Behind the sarcasm,humour of postings by vhaldavnekar,lies real understanding of why is happening in the country.I like his posts.
    Blunt but conveys meaning.
    CommentQuote
  • Dont read 3 +ve posts and decide that buying a house is right for you. I am just trying to balance out the -ve posts. Like I said in my previous posts that the prices of RE are not going to go up by 20% just because someone reads a few +ve posts. Similarly RE market has not crashed cause people have predicted wrongly that the RE bubble is going to burst and have been posting -ve posts and misguiding folks for the past 4-5 years.

    Originally Posted by innerpeace
    Dear paaaap,

    First of all, thanks for such a +.ve news. Please take no offense in what I am trying to say here.

    This news is indeed positive for those -
    1. who have been entrepreneur(s) for some time,
    2. who has failed in past and who still want to be in service + product sector as a businessmen and not workers.
    3. the businessmen who have been trying to grow there businesses.

    But, question remains, are these NORMAL-END-USER buyers of RE who want to be in 20 years loan with a not-so-secure job? If yes, then this is positive news for sure.

    I have personally checked guys like 'Little-Eye' in bangalore. Believe me, there are very few guys out there who want to be entrepreneur(s) AND have to carry 20 year RE LOAN.

    Please let me know if you have ever talked to a guy who is 10+ years experience - who lost a job - and made a 3 months jobless fight back to come back to IT life. This will help you realize how delicate it is to be in the mode of 'i-have-a-job'

    "Thinking of 'Other-guys-plate-is-full-of-food' doesnt satisfy one's hunger."
    CommentQuote
  • India's dominance of the offshoring industry has eased ever so slightly, with Mumbai losing its position as the world's second-best place to outsource to Filipino capital Manila, according to the new Tholons 2014 Top 100 Outsourcing Destinations rankings report.

    The news isn't all bad for India: it's still home to six of the world's ten best outsourcing cities. The Philippines has two entries in the top ten, which is rounded out by Poland's Kraków and Ireland's Dublin.



    http://www.tholons.com/nl_pdf/Whitepaper_December_2013.pdf
    CommentQuote
  • Telstra could outsource as many as 1000 jobs to the Philippines and India following a review by two management consulting firms that is due to be completed by the end of next month.

    Telstra tipped to outsource another 1000 jobs
    CommentQuote
  • Novartis to cut or transfer up to 4,000 pharma jobs to India

    A significant number of jobs are expected to be moved to India, with the company saying that it plans to move existing operations in Hyderabad to a business services centre as part of its consolidation strategy.

    "The new centre is expected to open in late 2015 or early 2016 and will bring together Novartis operations that are currently spread across three sites in Hyderabad as well as provide for future growth," the statement said.


    Novartis to cut or transfer up to 4,000 pharma jobs to India - InterAksyon.com
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  • Originally Posted by vaibav123
    Behind the sarcasm,humour of postings by vhaldavnekar,lies real understanding of why is happening in the country.I like his posts.
    Blunt but conveys meaning.


    Are sir dont take too much tension. Just posting a few +ve posts thats it. Country is in trouble and Indian rupee is reflecting that trouble but that makes Indian IT sector that much more competitive.
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  • Indian IT companies' recent strong positive commentary on greater demand from their top customers was underscored earlier this week by more sombre news for in-house technology staff at Bank of America Corp.

    Even as the Indian companies gear up for increased business from financial clients, their biggest customers, that the demand is still being driven by a strong cost-cutting effort was reiterated by BAC's news.

    The second-largest US bank, widely believed to be one of the largest clients of Bangalore-based Infosys, India's No. 2 software services provider, was reported to be cutting an undisclosed number of technology jobs, prompting some analysts to say Indian IT firms could benefit.

    Bank of America staff cuts spell good news for Indian IT firms - Economic Times
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  • Paaaaap,
    Take it easy. I had started a thread with all positive threads to uplift our mood.This post was placed in off topic forum.
    Please add some good news there.There are always positive things to be happy about.
    CommentQuote
  • Home prices begin to rise, signal change in real estate market mood

    In Bangalore and Pune, prices have risen for the first time since the last quarter of FY 13, the latest Residex data shows. The biggest rise was in Nagpur (8 per cent over the previous quarter), followed by Guwahati (7.4 per cent) and Pune (7.3 per cent).

    Home prices begin to rise, signal change in real estate market mood | The Indian Express
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  • Which post and which thread? is this thread only for -ve posts? I see people pasting same posts across multiple threads and sometimes across cities.

    Originally Posted by vaibav123
    Paaaaap,
    Take it easy. I had started a thread with all positive threads to uplift our mood.This post was placed in off topic forum.
    Please add some good news there.There are always positive things to be happy about.
    CommentQuote
  • This article might be of help

    "The tax department’s official data prepared recently also states that 1,555,220 persons purchased or sold immovable property worth Rs.30 lakh or more; 2,061,443 persons made payments of Rs.2 lakh or more in a year against their credit card bills; people who received interest income of Rs.50,000 and above from banks and people who purchased bullion or jewellery of Rs.5 lakh or more."

    Over four million high spenders in India under tax scanner - Livemint

    Originally Posted by NG2012
    I am dying to know. But its impossible to get that statistics. Govt has stopped publishing income tax statistics so we do not know how many people this year filed taxes for more income than 20 lakhs income. Now, that number may not tell us everything, but we can still imagine the state of affairs in the world of high-salaried jobs.
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  • Being +.ve ....

    Originally Posted by paaaap
    Similarly RE market has not crashed cause people have predicted wrongly that the RE bubble is going to burst and have been posting -ve posts and misguiding folks for the past 4-5 years.


    Dear 'paaaap'

    I understand that you feel many people stated about burst in last 4-5 years which never happened. I understand that there are many so-called -.ve posts. And you are just trying to create a positive mood. Appreciate it.

    See, the way I see this RE market is different than many others and that is quiet normal. I am trying to figure out what is the basis of this inflation in RE. I have spent many hours on internet, talking to ppl who have done RE purchases/investments and I am still not getting the right answer.

    1. Are builders installing golden-bathroom fittings, kitchen fittings?
    2. Are they providing 'Pure Ganga Jal from Himalayas' in houses?
    3. Are they providing central AC in the house?

    I am being sarcastic here so lets not quote those points. The point is, if price is getting increased every 2-3 months (actually every 2-3 weeks), what is the reason behind this?

    a. Builder is greedy
    b. Builder and Politico and babu and bank and so on... nexus is greedy
    c. Amenities associated with that purchase are so awesome that one can 'pledge' there future 10-20 years to bank and surrender life to builder etc

    What is the main purpose behind this mad race of purchasing such items which are not even worth to stay in?

    I have visited many places, many friends to see how their purchases/schemes look like. Believe me there is hardly any site I felt worth 80 L etc.

    I saw a resale flat, ad was - full ventilation, 24x7 water blah blah... 3-5 yrs old.. somewhere next to Sinhgad road..

    What I saw exactly:

    1. Lift is very very close to hall - so no one can find peace in hall continuous sounds of ppl chitter-chatter and mechanical activity of lift.
    2. You can actually touch small plants, wet cloths put in balcony of other flat - so very very less gap in two flats balconies
    3. If one open bedroom window, one can show his/her bedroom activity to people going from fly-over - that close !!!
    4. No other windows except small chimney style window to Kitchen.
    5. In case of fire or medical emergency, no fire-fighting vehicle, no ambulances can get close to even 100 meters from apartment

    Price - Just INR 80 Lakhs !!!! My brain farted !

    According to NHB NHB

    From 2007 to 2013 - Pune prices moved from 100 to 235 - in same time Bangalore moved from 100 to 111 !!

    My very basic question remains - what makes all those people to raise prices - that too in pune where infra is crippled? Now lets nor argue on 'boss, infra is not crippled, our city is better than XYZ'. Go to NOIDA or DELHI to see better roads. Go to Bangalore to see how IT parks are planned near outer ring road. Go to Mumbai to know no-matter-what, you will reach to destination in time if you decide. I know all those cities have there own problems too. Where does Pune stand on all those counts?

    A very good friend of mine (and many others along with Builders) stated - "Bhai, it has to do with demand and supply. Look at onions what happened. If demand is less, prices will go high" and at the same time, there are news from various sources that un-sold inventory is piling up !!

    What is the use of being positive when there are so many -.ve things are around? Now dont tell me 'ummed pe duniya kayam hai'

    And last cent from me -

    I had lost job once in 2012, I had 10 years + experience in this IT with multiple patents/inventions in field of electronics systems when I came out. Layoff was mainly due to non-performing 'company' and not non-performing 'engineers'.

    Once you reach this so-called-expiry-date, it is actually difficult to bounce back or even change jobs. Talk to people from product based companies who has felt these tremors. And in that period of time, one always faces truth about what actually can happen if you loose job. All other things, RE growth, Gold prices, investments from some pharma companies, IIM-B getting hikes, deloitte opening new center actually wont help at that time. I have even seen PhDs (i.e. BTech, Mtech From IIT-Madras and PhD from US University) struggling to get a job in Bangalore as companies do-not want (I repeat - many companies DO NOT WANT) such highly skilled labors in INDIA. If you still want proof, I can provide. Nobody wants old people on the sack when there is already a slowdown happening around. It may differ from industry to industry but it will eventually happen to most of them. I chose to invest in higher education rather than investing in RE. I know many will say 'who cares' but I thought to let you know the choice I made over RE. I am doing it in CASH.

    Dont tell anyone that it will 'NEVER HAPPEN to YOU/ANYONE ELSE'

    Pledging 10-20 years of life to banks and paying such a high cost to RE in crippled place in this face of industry, at this time of life and with this education - I call it suicide.

    Eventually, it pops-down to same old line which all people use: 'if you feel comfortable in budget, amenities, self-use and locality go for it'

    I feel this line is similar to what MF uses 'mutual funds are subject to market risk please read offer documents carefully before investing'
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  • Now that the prices have started to rise please see what will happen with 20% appreciation per year in next 5 years for flat of 80 lakhs. Hope that you all are not dumb and miss out on the bus.

    Old New
    80lac 96lac
    96lac 1.15 crore
    1.15 crore 1.38 crore
    1.38 crore 1.65 crore
    1.65 crore 2.00 crore

    And with so much
    -New jobs
    -Money allocation in the market
    -Salary hikes
    And last but not the least prices are now rising very quickly please book asap. Please it is a humble request to all those who want to buy flats. If you are in doubt please refer to posts by real intelligent people like paap, compu, champu and all.
    Happy purchasing 1 2 ka 4 and 4 8 ka 16.
    I am thinking of coming out with a geometric progression formula for Pune Real Estate I think anyone who hits the target may get a noble prize for the same.
    "Pune - Where Gods also find difficult to reside in such an heavenly abode"
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  • Ha ha ha - Lagta hai this person really has something about javadekars. Seems they have thrown him out from one of their sites. He was pro builders 3-4 yrs ago. He used to say yes to any property or property description one gave. It is like money should roll, transaction should happen so that any one who is related to RE gets the benefit. It is like people in stock and commodity broking firm tell that one can mint lakhs and lakhs of rs and ask out to operate your account so that you can get huge profits.
    BTW look at the attitude of the builders these days. They have minted so much money that they now care a damn about anyone, even people who where helping them initially in their heydays. In marathi there a term to call them "Mazlele"
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